With the recent OT Injunction issued, employers are asking “now what?”
December 2, 2016
Theresa Zechman, employment management and labor relations specialist, Stevens and Lee, offers further insight on the nationwide injunction issued on November 22, 2016 putting overtime pay regulation on hold.
Since the OT injunction was issued on November 22, 2016, employers have asked what now? The most common question employment lawyers have received centers around what to do if employees’ schedules, salaries or exemption status have already been changed or modified in anticipation of the Final Rule going into effect.
The decision to rescind changes to schedules, salaries or exemption status lies with the employer. In anticipation of the Final Rule, some employers had already made arrangements such as changing employees’ status from exempt to hourly and/or maintaining the exemption but increasing the salary to be compliant with the proposed new salary level. The employer needs to make the decision as to whether it wants to return these employees to either salaried exempt or whether they want to rescind the salary increase.
The decision to rescind the recent changes truly rests with the employer and is in the employer’s sole discretion. Of course there may be headaches either way. For example, if an employee was advised they were receiving a salary increase, any attempt to rescind that salary increase will most likely be met with decreased employee morale which is obvious. No one wants to be told they are getting a raise only to be told a week or two later, the employer is rescinding it. Any attempt to rescind previously announced raises, while permissible, will likely result in overall poor employee morale.
If the employer has changed the employee’s exemption status to non-exempt, hourly and changed schedules accordingly, it is permissible for the employer to rescind and revert back to the prior status quo. Again, this decision lies solely with the employer. Some employees will welcome the rescission as they wanted to maintain their exempt, salaried status while some employees may have been anticipating increased income due to the possibility of overtime work. Either way the employer can be in a Catch-22 when it comes to pleasing employees. However, it is the employer’s decision to make. Of course, the decision to either maintain the exemption or hourly status must be uniform, i.e., the employer cannot maintain one employee as hourly and another employee in the same job classification as salary exempt. It is for the employer to determine whether to rescind the changes and revert to the original designation and schedules. Switching the employee back will not cause legal headaches for the employer since there is no change in the law. Of course, switching back may cause administrative headaches for payroll personnel who may have already switched the employees and will now have to switch employees back. However, no legal headaches or impediments are present that would hinder or prevent the employer from rescinding the changes.
If an employer has not implemented the changes, there is no need to do so at this point and it is more practical to continue to maintain the status quo. The Court made its opinion regarding the Final Rule clear that it was the Court’s belief that the DOL had no authority to issue the Final Rule. It is unlikely that the Court will have a change of heart given the strength of the injunction opinion. Accordingly, there is simply no uncertainty at this point regarding the future of the Final Rule, it is dead with extraordinarily limited chance of ever being resuscitated.
If employees ask about the injunction or whether any changes will be made, if none have been made thus far, it is reasonable at this point to maintain that until the Court rules otherwise, the Final Rule will not be implemented.
Of course, the benefits of proceeding as though the final rule has gone into effect depend upon your audience. Employees who received a salary increase see the benefit and rescinding the salary increase is a definite con to that specific employee even though it may be a financial benefit for the employer to rescind the increase. The employer needs to determine its priority, whether it is maintaining employee morale or labor costs. Most employers who have advised employees of the salary increase in anticipation of the Final Rule have made the decision to move forward with the salary increase. However, employers who anticipated changing the exemption status from exempt to hourly are generally moving back to exempt status. Again, this decision to do so rests in the sole discretion of the employer and at this point the Final Rule should not be a consideration in the decision to make any changes or adjustments concerning an employee’s exemption status and/or salary level.